"Today's 0.5 per cent increase in official cash rates by the Reserve Bank will compound the pressures facing Australian industry," Innes Willox, Chief Executive of the national employer association Ai Group said today.
"While interest rate increases are an orthodox response to rising inflation, if we raise rates too rapidly it could crunch business and consumer confidence, at a time when businesses are struggling with large wage increases, labor and skills shortages and rising energy costs. The clear indication is that this rate rise may be far from the last but the impacts on demand and confidence need to be front of mind as future decisions are made.
"This emphasises the importance of addressing supply constraints across the Australian economy. Productivity raising reforms and resuming skilled migration are essential in this inflationary environment.
"It is also critical that the recent large increase in award wages does not flow more broadly into wages and add to inflationary pressures that lead to even higher interest rates," Mr Willox said.
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